1012-00005 · Stonefield Logistics Group · Case Assessment & Strategy

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MEMORANDUM

PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT

To: Patrick Gallagher, Lead Associate; Samuel Eklund, Responsible Partner

From: Simone Laroche, Associate

Date: September 14, 2022

Re: Detailed Review and Analysis of Transportation Services Agreement (Contract Ref. No. SLG-VTS-2019-0315) — Vantor Holdings Corp. v. Stonefield Logistics Group Inc., Case No. 22-cv-07841 (S.D.N.Y.)

Matter No.: 1012-00005

Classification: Attorney-Client Privileged / Work Product

I. Purpose and Scope of Memorandum

This memorandum provides a comprehensive, section-by-section analysis of the Transportation Services Agreement dated March 15, 2019 (the "TSA" or the "Agreement") between Stonefield Logistics Group Inc. ("Stonefield" or "SLG"), in its capacity as "Shipper-Broker," and Vantor Transport Services LLC ("VTS"), in its capacity as "Carrier-Provider." The TSA was drafted by Ashford Meridian LLP on behalf of Stonefield; the drafting team was led by Lorraine Beckwith, Partner in the Commercial Contracts practice group, and Troy Nakamura, Senior Associate, both of Ashford Meridian.

The purpose of this memorandum is to identify and analyze those provisions of the TSA that are critical to Stonefield's defense of the breach-of-contract claim filed by Vantor Holdings Corp. ("Vantor" or "Vantor Holdings"), the parent company and sole member of VTS, in the action captioned Vantor Holdings Corp. v. Stonefield Logistics Group Inc., Case No. 22-cv-07841 (S.D.N.Y.). This memorandum is intended for the litigation team's internal use and is prepared in anticipation of litigation.

The analysis focuses on six key areas of the TSA that are central to the claims and defenses in this action:

(1) Termination for Cause (Section 13.1) — the provision under which Stonefield purported to terminate the TSA;

(2) Cure Notice Requirements (Section 13.2) — the procedural prerequisites for a valid termination for Cause;

(3) Liquidated Damages (Section 14.2) — the provision that establishes Stonefield's potential liability if the termination is determined to have been "other than for Cause";

(4) Force Majeure (Section 12.1) — the provision excusing performance during qualifying events, which is central to the Annual Committed Volume defense;

(5) Substitute Equipment / Surge Capacity (Section 7.4) — the provision requiring VTS to arrange alternative capacity when its dedicated fleet cannot fulfill Stonefield's requirements; and

(6) Exclusivity (Schedule C) — the provisions governing Stonefield's obligation to use VTS as the exclusive carrier on designated lanes.

In addition to these six primary areas, the memorandum addresses several ancillary provisions that bear on Stonefield's litigation posture, including the mutual consequential damages waiver (Section 15.1), the rate adjustment mechanism (Section 5.3), the dispute resolution procedure (Section 16), the minimum volume commitment (Section 4.1), and the integration, amendment, and waiver provisions (Sections 17.5 and 17.6).

Throughout this analysis, the memorandum identifies ambiguities in the TSA's language and interpretive risks that may affect Stonefield's ability to sustain its position that the termination was validly effected for Cause. Where appropriate, the memorandum cross-references companion memoranda that have been or will be prepared on discrete issues requiring more detailed treatment.

II. Executive Summary of Key Findings

The TSA is a detailed and heavily negotiated commercial agreement between two sophisticated parties operating in the truckload transportation industry. It is governed by New York law pursuant to Section 17.1 and contains a forum selection clause designating the United States District Court for the Southern District of New York, or in the alternative, the Supreme Court of the State of New York, New York County, as the exclusive forums for dispute resolution (Section 17.2). The parties have waived trial by jury (Section 17.3).

The TSA establishes an initial five-year term running from April 1, 2019 through March 31, 2024, with one automatic two-year renewal period (extending the term through March 31, 2026) unless either party provides at least 180 days' written notice of non-renewal prior to the expiration of the initial term. Absent termination for Cause under Section 13.1, neither party has a unilateral right to exit the Agreement during the term.

Stonefield's termination of the TSA on March 4, 2022, effected by letter from General Counsel Tobias Wren, invoked Section 13.1(a), asserting that VTS had committed material breaches of the Agreement that remained uncured after the 30-day cure period specified in the Cure Notice of January 18, 2022. At the time of termination, approximately two years and twenty-seven days remained in the initial term (March 4, 2022 through March 31, 2024).

The key conclusions of this analysis are summarized as follows:

Section 13.1 — Termination for Cause. Section 13.1 provides a facially robust framework for termination for Cause, enumerating four grounds including material breach uncured after notice. However, the TSA does not independently define the term "material breach," and the provision thus defaults to the multi-factor common-law standard applied by New York courts. This introduces significant interpretive ambiguity, as whether VTS's performance failures constitute "material" breach will be a fact-intensive inquiry subject to competing characterizations by the parties. This ambiguity is the single most significant interpretive risk in the TSA for purposes of this litigation.

Section 13.2 — Cure Notice. The Cure Notice provision requires that the terminating party specify the alleged breaches "with reasonable particularity." Stonefield's January 18, 2022 Cure Notice, issued by Raymond Hess (Director, Contract Compliance) to Sandra Milescu (COO, Vantor/VTS), identifies all five Service Level Obligation ("SLO") categories, specific contractual thresholds and actual performance figures, documented cargo claims, and Section 7.4 failures. The Cure Notice appears to satisfy the "reasonable particularity" standard, but this issue warrants a separate detailed analysis and is flagged for further memorandum treatment.

Section 14.2 — Liquidated Damages. The liquidated damages clause presents both an offensive opportunity and a significant defensive risk. If the court determines that Stonefield's termination was "other than for Cause," Stonefield's exposure under Section 14.2 is $67.23 million (75% of the Annual Committed Volume multiplied by the remaining term). Stonefield has strong arguments that the clause is an unenforceable penalty under New York law — particularly given the gross disproportion between the 75% multiplier and VTS's actual operating margins — but enforcement is far from certain. The enforceability analysis is the subject of a companion memorandum dated September 19, 2022.

Section 12.1 — Force Majeure. The force majeure clause supports Stonefield's defense against Vantor's allegation that Stonefield failed to tender the Annual Committed Volume in Contract Year 2 (April 2020–March 2021). Stonefield properly invoked Section 12.1 for the six-month period of April through September 2020, citing the COVID-19 pandemic, and the adjusted ACV for that period reflects that Stonefield actually exceeded its obligation. Vantor's calculation of an ACV shortfall in CY2 appears to ignore the force majeure adjustment entirely.

Schedule C — Exclusivity. Schedule C establishes exclusivity obligations on 14 designated "Primary Lanes" but expressly preserves Stonefield's full discretion to use alternative carriers on "Secondary Lanes" and "Spot Lanes." Preliminary analysis indicates that Stonefield's use of Cascade Freight Systems Inc. and Briarwood Trucking Co. — the subject of Vantor's exclusivity violation claim — occurred on lanes classified as Secondary Lanes under Schedule C, placing that usage outside the exclusivity restriction. However, confirmation through detailed lane-by-lane mapping during discovery is required.

Section 15.1 — Consequential Damages Waiver. The mutual consequential damages waiver may bar several categories of Vantor's claimed damages totaling approximately $9.47 million, including stranded asset costs, workforce reduction costs, and mitigation costs. The interplay between Section 15.1 and the liquidated damages provision in Section 14.2 is complex and requires further analysis in a separate memorandum.

III. Overview of the TSA

A. Parties and Signatories

The TSA was executed between the following parties:

Stonefield Logistics Group Inc. ("Stonefield" or "SLG"), designated as "Shipper-Broker" under the Agreement. Stonefield is a Delaware corporation with its principal place of business at 4200 Commerce Parkway, Suite 800, Fort Worth, Texas 76102. Stonefield is one of the largest third-party logistics and freight brokerage firms in the United States, with annual gross revenues in excess of $4.8 billion.

Vantor Transport Services LLC ("VTS"), designated as "Carrier-Provider" under the Agreement. VTS is a New York limited liability company and the wholly owned operating subsidiary of Vantor Holdings Corp. ("Vantor" or "Vantor Holdings"). VTS serves as the primary asset-based trucking operation within the Vantor corporate family, operating a fleet of approximately 650 owned tractors and 2,100 trailers, principally in the Northeast, Mid-Atlantic, and Southeast corridors.

It is important to note that Vantor Holdings Corp. is not a signatory to the TSA. The contracting party on the carrier side is VTS, not its parent company. This distinction may be relevant to standing issues, as Vantor Holdings — not VTS — is the named plaintiff in this litigation. The standing implications of this distinction are addressed in a separate memorandum on standing, dated December 8, 2022, and are not repeated here except as necessary for context.

B. Date of Execution and Effective Date

The TSA was executed on March 15, 2019, by authorized representatives of both parties. The Agreement specifies that its terms and obligations became effective on April 1, 2019 (the "Effective Date"), which also serves as the commencement date for the initial term and for calculating Contract Year obligations, including the Annual Committed Volume.

The TSA bears Contract Reference No. SLG-VTS-2019-0315, assigned by Stonefield's contract management system.

C. Term and Renewal

The TSA establishes a five-year initial term commencing on April 1, 2019 and expiring on March 31, 2024. The Agreement further provides for one automatic two-year renewal period, which would extend the term through March 31, 2026, unless either party provides written notice of non-renewal at least 180 days before the expiration of the initial term. Applying this calculation, the deadline for non-renewal notice with respect to the initial term would be October 2, 2023 (180 days before March 31, 2024).

A critical structural feature of the TSA is that it contains no early termination right other than for Cause under Section 13.1. This means that neither party has a unilateral right to exit the Agreement during the term absent one of the four enumerated grounds for Cause. The absence of a termination-for-convenience provision underscores the parties' intention to create a binding, long-term arrangement and heightens the significance of whether Stonefield's termination satisfied the Cause requirements.

D. Scope of Services

Under the TSA, VTS agreed to provide dedicated and on-demand truckload transportation services across specified lanes in the Northeast, Mid-Atlantic, and Southeast corridors of the United States. The scope of services encompasses both dedicated fleet capacity — tractors and trailers assigned exclusively to Stonefield freight — and on-demand or "surge" capacity to accommodate volume fluctuations.

VTS committed to maintaining a minimum fleet capacity of 400 tractors and 1,200 trailers available for Stonefield freight at all times during the term. This dedicated capacity commitment is a core obligation under the Agreement and is directly measured by the Equipment Availability SLO in Schedule D.

To place this commitment in context, VTS's total fleet as a whole comprises approximately 650 owned tractors and 2,100 trailers. The Stonefield commitment therefore represented approximately 62% of VTS's tractor fleet (400/650) and approximately 57% of its trailer fleet (1,200/2,100). This level of concentration is significant: it means that VTS committed well over half of its entire asset base to the Stonefield relationship, creating substantial economic dependency on the continuation of the TSA. This concentration will be relevant to several issues in the litigation, including (i) VTS's claims of stranded asset damages, (ii) VTS's argument that Stonefield's volume shortfalls forced fleet redeployment, and (iii) the reasonableness of the liquidated damages formula.

E. Governing Law and Forum Selection

Section 17.1 of the TSA provides that the Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict-of-laws principles. Section 17.2 establishes an exclusive forum selection clause, providing that any action or proceeding arising out of or relating to the Agreement shall be brought in the United States District Court for the Southern District of New York, or alternatively, in the Supreme Court of the State of New York, New York County. The parties consent to personal jurisdiction in those courts and waive any objection based on improper venue or forum non conveniens.

Section 17.3 provides for a mutual waiver of jury trial: both parties irrevocably waive any right to trial by jury in any action or proceeding arising out of or relating to the Agreement. Jury trial waivers are generally enforced under New York law between sophisticated commercial parties that have negotiated the waiver at arm's length, particularly where (as here) the waiver is conspicuously included in a separately identified contractual provision. We do not anticipate a viable challenge to the enforceability of this waiver.

F. Annual Committed Volume (ACV) and Rate Structure

The TSA includes a minimum volume commitment by Stonefield, set forth in Section 4.1. Under this provision, Stonefield committed to tender a minimum annual freight volume of $43.2 million in transportation charges to VTS over each Contract Year (each twelve-month period commencing on April 1). Over the five-year initial term, this creates a total minimum commitment of $216 million ($43.2 million per year times five years). The ACV is a binding obligation, not merely a projection or aspirational target — a distinction that bears on both Stonefield's and Vantor's claims.

The rate structure for transportation charges is established in Schedule B to the TSA, which sets per-mile rates for each designated lane (origin-destination pair). These rates are subject to annual adjustment pursuant to the Rate Adjustment Mechanism in Section 5.3 of the Agreement. Under Section 5.3, rates are adjusted automatically each April 1 based on a blended index comprising 70% diesel fuel index and 30% Consumer Price Index for All Urban Consumers ("CPI-U"). The adjustment is formulaic and automatic — it does not require renegotiation, mutual agreement, or any affirmative action by either party. The rates simply reset each April 1 by application of the index formula to the prior year's rates.

The rate adjustment mechanism is of particular relevance to this litigation because the projected April 2022 adjustment — which would have taken effect on April 1, 2022, less than one month after Stonefield's March 4, 2022 termination — would have increased the weighted average per-mile rate from $2.87 to $3.28. This represents a 14.3% increase (($3.28 − $2.87) / $2.87 = 14.29%), which would have added approximately $6.2 million in annual transportation costs to Stonefield. This projected rate increase is relevant to Vantor's allegation (Amended Complaint, Paragraph 58) that Stonefield's termination was pretextual and economically motivated — i.e., that Stonefield used VTS's performance failures as a convenient pretext for exiting a contract that had become financially unfavorable in light of the impending rate increase. The rate adjustment issue is analyzed in detail in Section XI of this memorandum.

IV. Section 13.1 — Termination for Cause

A. Text of Section 13.1

Section 13.1 of the TSA provides, in relevant part, as follows:

13.1 Termination for Cause. Either party may terminate this Agreement upon the occurrence of any of the following events (each, "Cause"):

(a) A material breach of any provision of this Agreement by the other party that remains uncured for thirty (30) calendar days after the non-breaching party delivers written notice to the breaching party specifying the breach in accordance with Section 13.2;

(b) The insolvency, bankruptcy, or filing of a petition under any bankruptcy or insolvency law, or the making of an assignment for the benefit of creditors, by the other party;

(c) The failure by the Carrier-Provider to maintain any insurance coverage required under Section 9.1 for a period of more than fifteen (15) calendar days after written notice of such failure;

(d) A material violation of applicable law, including but not limited to applicable regulations of the U.S. Department of Transportation and/or the Federal Motor Carrier Safety Administration, by the Carrier-Provider.

B. Analysis of Section 13.1(a) — Material Breach

Stonefield's termination letter of March 4, 2022, issued by General Counsel Tobias Wren and addressed to VTS and Vantor Holdings, invoked Section 13.1(a) as the basis for termination. The letter asserted that VTS had "failed to cure the material breaches" identified in the Cure Notice dated January 18, 2022 within the thirty-day cure period established by Section 13.1(a), and that Stonefield was therefore exercising its right to terminate the Agreement for Cause, effective immediately upon receipt of the termination letter.

A critical observation regarding Section 13.1(a) is that the TSA does not independently define "material breach." The provision employs the phrase "material breach of any provision of this Agreement" but provides no enumeration, threshold, or contractual standard for determining what rises to the level of materiality as distinguished from a minor or immaterial breach. Nor does the Agreement provide that certain obligations are "material" while others are not — all provisions are treated uniformly under the termination clause.

The absence of a contractual definition of "material breach" creates an interpretive ambiguity that defaults to New York common law. Under established New York precedent, whether a breach is "material" is a fact-intensive inquiry that does not lend itself to bright-line rules. New York courts apply a multi-factor test derived from the Restatement (Second) of Contracts Section 241, considering:

(i) the extent to which the injured party will be deprived of the benefit which it reasonably expected;

(ii) the extent to which the injured party can be adequately compensated in damages for the part of that benefit of which it will be deprived;

(iii) the extent to which the party failing to perform or to offer to perform will suffer forfeiture;

(iv) the likelihood that the party failing to perform or to offer to perform will cure its failure, taking account of all the circumstances including any reasonable assurances; and

(v) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.

See JNKM Assocs. LLC v. Gottlieb, 71 A.D.3d 914, 917 (2d Dep't 2010); Bear Stearns Inv. Prods., Inc. v. Hitachi Auto. Prods. (USA), Inc., 401 B.R. 598, 616 (S.D.N.Y. 2009); Restatement (Second) of Contracts Section 241 (1981).

Assessment. VTS's Q4 2021 performance failures were severe and spanned all five Service Level Obligations established in Section 8.1 and Schedule D. The magnitude and breadth of these failures, as described in detail below, strongly supports the argument that they constitute material breach under the common-law multi-factor test. In particular, the first factor — the extent to which the injured party is deprived of the benefit it reasonably expected — weighs heavily in Stonefield's favor: Stonefield contracted for reliable, high-quality transportation services meeting specified performance thresholds, and received dramatically substandard performance across every measurable dimension.

However, the absence of a contractual definition means that Vantor will have room to argue that the breaches were not "material" when viewed in the full context of the parties' commercial relationship. In particular, Vantor is likely to argue that VTS's performance decline should be evaluated in light of Stonefield's own alleged volume shortfalls (reducing VTS's revenue and forcing fleet redeployment), market-wide driver shortages, and Stonefield's alleged failure to cooperate in the performance improvement process contemplated by Section 8.3. Under the multi-factor test, the third factor (forfeiture) and fifth factor (good faith) may favor VTS if Vantor can successfully show that Stonefield's own conduct contributed to or caused the performance failures.

The ambiguity in the "material breach" definition is, in my assessment, the single most significant interpretive issue in the TSA for purposes of this litigation. It transforms what should be a straightforward contractual analysis into a fact-intensive inquiry that will likely be decided at trial or, at best, on a fully developed summary judgment record.

C. Service Level Obligations (SLOs) and Performance Metrics

Section 8.1 of the TSA and Schedule D establish five Service Level Obligations that VTS is required to maintain throughout the term of the Agreement. These SLOs are expressed as quantitative performance thresholds measured on a quarterly basis:

The cargo claims data reflects 16 documented cargo claims filed during November and December 2021, totaling $387,400 in claimed losses — more than double the 0.5% contractual threshold.

Analysis. The magnitude and breadth of these performance failures — across all five SLOs simultaneously, with shortfalls ranging from 11.4 to 23 percentage points — strongly supports a finding of material breach under any reasonable application of the common-law factors. The TSA treats SLOs as core performance obligations. Schedule D describes them as "minimum performance standards" that VTS "shall maintain at all times during the Term," language that reinforces their mandatory character. The SLOs are not aspirational targets, benchmarks for discussion, or guidelines for continuous improvement — they are binding contractual obligations with quantified thresholds.

The equipment availability shortfall is particularly noteworthy. VTS committed to maintaining 400 tractors available for Stonefield freight; only approximately 248 tractors were available in Q4 2021, a shortfall of approximately 152 tractors or 38% of the committed fleet. This shortfall directly affected VTS's ability to accept tenders and make timely pickups, creating a cascading effect across the other SLOs.

However, there is an important caveat. The TSA does not expressly provide that failure to meet SLOs constitutes per se material breach. Section 13.1(a) speaks of "material breach of any provision," and the SLOs are certainly "provisions" of the Agreement, but the TSA does not include a statement such as "any failure to meet the SLO thresholds shall be deemed a material breach." This omission is notable because sophisticated parties drafting a detailed agreement of this type could easily have included such language if they intended SLO failures to automatically trigger termination rights.

Moreover, Section 8.3 provides for "performance improvement plans" upon SLO failures, a provision that suggests the parties contemplated a graduated remedial process rather than immediate termination rights in the event of performance shortfalls. The existence of Section 8.3 creates a potential argument for Vantor that Stonefield was required to exhaust the performance improvement plan process before invoking Section 13.1(a) based on SLO failures. This interaction is analyzed in detail immediately below.

D. Interaction Between Sections 13.1 and 8.3

The interaction between Section 8.3 (performance improvement plans) and Section 13.1(a) (termination for material breach) is a potentially significant interpretive issue.

Section 8.3 provides, in relevant part, that upon a failure to meet one or more SLO thresholds in any quarterly reporting period, "the parties may develop a performance improvement plan setting forth specific remedial actions, milestones, and timelines for restoring performance to SLO thresholds." The provision further states that "[t]he parties shall cooperate in good faith in the development and implementation of any such performance improvement plan."

The central interpretive question is whether Section 8.3 creates a condition precedent to termination for Cause based on SLO failures — i.e., whether Stonefield was required to engage in the performance improvement plan process before invoking Section 13.1(a).

Conclusion. The better reading of the Agreement is that Section 8.3 provides an optional collaborative remedy that does not supplant the independent termination right established in Section 13.1(a). Several textual indicators support this interpretation:

First, the use of "may" rather than "shall" in the operative clause ("the parties may develop a performance improvement plan") is permissive, not mandatory. If the parties had intended to make the performance improvement plan process a prerequisite to termination, the natural drafting choice would have been "shall" — i.e., "the parties shall develop a performance improvement plan before either party may exercise termination rights under Section 13.1."

Second, Section 13.1 contains no cross-reference to Section 8.3 and does not condition the exercise of termination rights on compliance with or exhaustion of any performance improvement process. Section 13.1 is self-contained: it requires only a material breach, written notice, and expiration of the cure period.

Third, the second sentence of Section 8.3 ("the parties shall cooperate in good faith in the development and implementation of any such performance improvement plan") uses mandatory language ("shall cooperate") only with respect to the implementation of a plan that has been developed — not with respect to the initial decision to develop a plan. This structure confirms that the decision to develop a plan is discretionary, while cooperation in executing a plan, once initiated, is mandatory.

However, Vantor will likely argue that the inclusion of Section 8.3 reflects the parties' shared intent that SLO failures be addressed through a collaborative, graduated process before the nuclear option of termination is invoked. Vantor will contend that reading Section 13.1 in isolation from Section 8.3 renders Section 8.3 meaningless — a "surplusage" argument that has traction under New York contract interpretation principles, which favor readings that give effect to all provisions. Vantor may also invoke the implied covenant of good faith and fair dealing to argue that Stonefield's decision to bypass the performance improvement plan process and proceed directly to termination was procedurally premature and substantively disproportionate.

Recommendation. While the textual arguments favor Stonefield's position, the interplay between Sections 8.3 and 13.1 presents an interpretive risk that should be accounted for in briefing strategy. Stonefield should emphasize that (i) the permissive language of Section 8.3 is dispositive; (ii) no performance improvement plan was ever initiated or requested by either party, meaning there is no plan for Stonefield to have "bypassed"; and (iii) the severity and breadth of VTS's Q4 2021 failures — across all five SLOs, with shortfalls of 11 to 23 percentage points — rendered a performance improvement plan inadequate as a practical matter. A carrier operating at 62% of committed fleet capacity cannot be "improved" to compliance through a remedial plan; the problem is structural, not incremental.

E. Burden of Proof Considerations

Under New York law, the party invoking termination for Cause generally bears the burden of proving that Cause existed at the time of termination. This means that Stonefield, as the terminating party, will bear the burden of establishing each element of the Section 13.1(a) termination at trial or on summary judgment.

Specifically, Stonefield should be prepared to demonstrate through admissible evidence:

(i) each SLO failure with objective, contemporaneous data (performance reports, tender records, cargo claims files, equipment logs);

(ii) that the SLO failures, individually or collectively, constituted "material breach" under the applicable New York common-law standard;

(iii) that the January 18, 2022 Cure Notice was adequate — i.e., that it specified the alleged breaches with "reasonable particularity" as required by Section 13.2; and

(iv) that VTS failed to cure the identified breaches within the thirty-day cure period (January 18 through February 17, 2022).

Stonefield's ability to meet this burden will depend heavily on the quality and completeness of contemporaneous documentation. I recommend that the litigation team prioritize the preservation and collection of all performance reporting data, tender acceptance/rejection records, equipment availability logs, cargo claims files, and internal and external communications related to VTS's Q4 2021 and Q1 2022 performance.

V. Section 13.2 — Cure Notice Requirements

A. Text of Section 13.2

Section 13.2 of the TSA provides, in relevant part, as follows:

13.2 Cure Notice. Prior to terminating this Agreement for Cause under Section 13.1(a) or Section 13.1(c), the terminating party shall deliver a written notice to the breaching party (a "Cure Notice") specifying with reasonable particularity the alleged breach or breaches giving rise to the right of termination and providing the breaching party the applicable cure period in which to cure such breach(es). The cure period shall be thirty (30) calendar days from the date of receipt of the Cure Notice for breaches under Section 13.1(a) and fifteen (15) calendar days from the date of receipt of the Cure Notice for insurance-related breaches under Section 13.1(c). The cure period shall commence upon receipt of the Cure Notice by the breaching party.

B. Analysis of "Reasonable Particularity" Standard

The TSA requires that the Cure Notice specify the alleged breaches "with reasonable particularity," but does not further define this term or prescribe any particular form or content requirements for the notice. The phrase "reasonable particularity" establishes a sufficiency standard that must be interpreted under the governing law.

Under New York law, the sufficiency of a cure notice is judged by whether it puts the breaching party on reasonable notice of the nature and scope of the alleged breaches, thereby enabling the breaching party to understand what it must do to cure and to take timely curative action. The standard does not require exhaustive detail or legal precision; it requires a description that is specific enough to identify the problem and practical enough to enable a response. See Filmline (Cross-Country) Prods., Inc. v. United Artists Corp., 865 F.2d 513, 518 (2d Cir. 1989) (cure notice must provide breaching party "sufficient information to understand and cure the alleged breach").

Stonefield's Cure Notice of January 18, 2022. The Cure Notice was sent by Raymond Hess, Director of Contract Compliance at Stonefield, to Sandra Milescu, Chief Operating Officer of Vantor/VTS. The notice was transmitted by both overnight courier and electronic mail and identified the following:

• Each of the five SLO categories established in Section 8.1 and Schedule D;

• The specific contractual threshold for each SLO;

• VTS's actual Q4 2021 performance figure for each SLO, with supporting quarterly data;

• The 16 documented cargo claims in November and December 2021, totaling $387,400, with claim reference numbers;

• VTS's chronic failure to provide substitute equipment or surge capacity as required under Section 7.4, citing specific instances of tender rejections without timely four-hour notification or substitute arrangement;

• A statement that the identified failures constituted material breaches of the Agreement under Section 13.1(a); and

• A statement that VTS had thirty (30) calendar days from receipt of the Cure Notice to cure the identified breaches, failing which Stonefield would exercise its right to terminate the Agreement for Cause.

Assessment. The Cure Notice appears to satisfy the "reasonable particularity" requirement. It identifies specific SLO metrics, contractual thresholds, actual performance figures, documented cargo claims with supporting detail, and concrete Section 7.4 failures. The notice is not vague or conclusory — it provides VTS with sufficient information to understand the nature and scope of the alleged breaches and to determine what remedial actions would be necessary to cure them within the thirty-day period.

A separate memorandum will provide more detailed analysis of the Cure Notice's adequacy, including a comparison of the notice's specificity against the standards applied in relevant New York case law and an assessment of whether any arguable deficiency in the notice could provide a basis for Vantor to challenge the validity of the termination.

C. The 30-Day Cure Period

The cure period under Section 13.2 commenced upon VTS's receipt of the Cure Notice on January 18, 2022. The notice specified a cure deadline of thirty calendar days from receipt, establishing a cure expiration date of February 17, 2022.

Vantor's Response — February 14, 2022. Three days before the cure deadline, VTS sent a written response dated February 14, 2022. The response was sent by Derek Pruitt, Vice President of Business Development at Vantor Holdings, and addressed to Janet Kirkwood, Vice President of Carrier Relations at Stonefield. The substantive content of the response may be summarized as follows:

• VTS acknowledged "operational challenges" during Q4 2021 but characterized them as temporary and attributable to external factors;

• VTS attributed its performance failures to three causes: (i) the nationwide driver shortage affecting the entire trucking industry; (ii) Stonefield's alleged failure to tender the minimum committed volumes under Section 4.1, which VTS claimed reduced its revenue and forced it to reassign fleet assets to other accounts; and (iii) Stonefield's alleged instructions to divert volume to lower-cost spot market carriers, further reducing VTS's workload;

• VTS asserted that it had "substantially cured the identified deficiencies" and that its Q1 2022 performance was "trending toward compliance with all SLO thresholds";

• VTS disputed the cargo claims data, asserting that several of the 16 claims were attributable to shipper packing deficiencies rather than carrier fault; and

• VTS characterized Stonefield's Cure Notice as "disproportionate" and suggested that the parties should instead engage in the performance improvement plan process contemplated by Section 8.3.

Notably, the February 14 response does not identify specific remedial actions taken to cure the identified breaches, does not provide updated performance metrics demonstrating improvement, and does not address the equipment availability shortfall (VTS's most severe SLO failure, at 62% versus the 85% threshold). The response is largely defensive and blame-shifting in character rather than demonstrating actual cure.

Stonefield's Termination — March 4, 2022. Stonefield terminated the TSA by letter dated March 4, 2022, issued by General Counsel Tobias Wren. The termination letter was sent fifteen days after the expiration of the thirty-day cure period on February 17, 2022. The letter asserted that VTS had "failed to cure the material breaches identified in the Cure Notice dated January 18, 2022" and invoked Section 13.1(a) as the basis for immediate termination.

Key issue. Whether VTS's February 14 response constituted "substantial cure" or merely acknowledged problems while deflecting responsibility is a critical factual question. The response does not present objective evidence of cure — it claims that performance is "trending toward compliance" but provides no data to support this assertion. Under New York law, "substantial cure" generally requires the breaching party to have remedied the breach in all material respects, not merely to have begun taking steps toward improvement or to have expressed an intention to cure in the future. A separate memorandum will analyze the "substantial cure" doctrine in detail and apply it to the facts of VTS's February 14 response.

D. Gap Between Cure Expiration and Termination

The TSA does not specify a deadline by which the non-breaching party must exercise its termination right after the cure period expires. Section 13.1(a) provides that the non-breaching party "may terminate" upon the occurrence of Cause (including uncured material breach), but does not impose a time limit on when that right must be exercised. Stonefield waited fifteen days — from February 17, 2022 (cure expiration) to March 4, 2022 (termination letter) — before issuing the termination letter.

Risk. Vantor could argue that the fifteen-day delay constitutes waiver of the termination right or that Stonefield's failure to terminate immediately upon cure expiration indicates that the breaches were not truly material or uncured. If the breaches were so severe as to warrant termination, Vantor might contend, Stonefield would have acted promptly rather than waiting more than two weeks.

However, a fifteen-day gap is unlikely to constitute waiver under New York law absent affirmative conduct by Stonefield indicating acceptance of continued performance or an intention to forgo the right to terminate. Mere passage of time, without more, is generally insufficient to establish waiver, particularly where (as here) the contract includes an express anti-waiver provision. See Section 17.6, discussed in Section XIII.E of this memorandum. The delay is far more likely attributable to the routine internal processes of a large corporate entity — specifically, the time required for Tobias Wren to consult with outside counsel at Ashford Meridian, coordinate with internal stakeholders, and prepare a formal termination letter. The delay is unremarkable and well within the range of reasonable administrative processing.

Recommendation. Notwithstanding the above analysis, it would be prudent to confirm through fact development that Stonefield did not engage in any conduct during the February 17 through March 4, 2022 period that could be characterized as acceptance of VTS's performance, ratification of the contract, or waiver of the right to terminate. In particular, the litigation team should determine whether Stonefield continued to tender freight to VTS during this period and, if so, the nature and volume of such tenders. Continued tendering during the gap period could, depending on the circumstances, be characterized by Vantor as inconsistent with a genuine belief that VTS was in material, uncured breach.

VI. Section 14.2 — Liquidated Damages

A. Text of Section 14.2

Section 14.2 of the TSA provides, in relevant part, as follows:

14.2 Liquidated Damages for Termination Other Than for Cause. In the event that the Shipper-Broker terminates this Agreement other than for Cause (as defined in Section 13.1), the Shipper-Broker shall pay to the Carrier-Provider, as liquidated damages and not as a penalty, an amount equal to seventy-five percent (75%) of the Annual Committed Volume multiplied by the number of full and partial Contract Years remaining in the then-current Term (with any partial Contract Year calculated on a pro-rata basis based on the number of days remaining in such partial Contract Year divided by 365). The parties acknowledge and agree that the liquidated damages set forth herein represent a reasonable estimate of the damages that the Carrier-Provider would suffer as a result of an early termination other than for Cause, that actual damages would be difficult to ascertain with precision at the time of contracting, and that such liquidated damages are not a penalty.

B. Calculation of Liquidated Damages Claimed

Based on the formula established in Section 14.2, Vantor's liquidated damages claim is calculated as follows:

Remaining term at termination: March 4, 2022 through March 31, 2024 — a total of approximately two full remaining Contract Years (CY3: through March 31, 2023; CY4: April 1, 2023 through March 31, 2024) and a partial year of approximately 27 days (March 4, 2022 through March 31, 2022, representing the balance of CY3 already in progress).

• Two full remaining Contract Years: 75% × $43,200,000 × 2 = $64,800,000

• Partial year (27 days): 75% × $43,200,000 × (27/365) ≈ $2,396,712 (rounded to $2,430,000 per the Trask Greystone report prepared by Dr. Philip Trask, Vantor's damages expert)

• Total liquidated damages claimed: $67,230,000

This amount is triggered only if the court determines that Stonefield's termination was "other than for Cause." If the termination is found to have been validly effected for Cause under Section 13.1, no liquidated damages are owed, and the entirety of the $67.23 million claim falls away. This binary outcome underscores the critical importance of the Cause analysis in Section IV of this memorandum.

C. Enforceability Analysis Under New York Law

New York courts apply a well-established two-part test to determine whether a liquidated damages provision is enforceable or constitutes an unenforceable penalty:

(1) Was the liquidated damages amount a reasonable estimate of the probable damages that would result from a breach at the time of contracting?

(2) Were actual damages difficult to ascertain at the time of contracting?

If both prongs are satisfied, the clause is enforceable and the stipulated amount is recoverable without proof of actual damages. If either prong is not met — if the clause is grossly disproportionate to any reasonable forecast of actual harm, or if actual damages were readily ascertainable at contracting — the clause may be found to be an unenforceable penalty. See Truck Rent-A-Ctr., Inc. v. Purdy Corp., 41 N.Y.2d 354, 355–56 (1977); JMD Holding Corp. v. Cong. Fin. Corp., 4 N.Y.3d 373, 380 (2005).

Arguments for Unenforceability (Stonefield's Position)

Stonefield has strong arguments that Section 14.2 is an unenforceable penalty under both prongs of the New York test:

First, actual damages from early termination of a transportation services contract are readily ascertainable — they comprise the difference between contract revenue and avoided costs, which is to say, lost profits. The parties were both sophisticated commercial entities with extensive financial data regarding operating costs, margins, and profitability on a per-lane and per-mile basis. VTS's actual lost profits from early termination could have been calculated with reasonable precision at the time of contracting using standard financial methods.

Second, the 75% multiplier bears no demonstrated relationship to VTS's anticipated profit margin on the Stonefield contract. VTS's actual operating margin on SLG freight is reported to be approximately 12%. A liquidated damages formula based on 75% of revenue — more than six times VTS's actual profit margin — is not a "reasonable estimate" of lost profits; it is a windfall that vastly overcompensates VTS for the actual economic harm of early termination.

Third, the resulting $67.23 million figure is grossly disproportionate to any reasonable estimate of VTS's actual harm. Dr. Evelyn Rosser of Kensington Analytics Group LLC, Stonefield's retained damages expert, opines that the maximum defensible damages under an alternative lost-profits theory are approximately $8.2 million. A liquidated damages figure that exceeds actual damages by a factor of approximately 8:1 is, by any standard, punitive rather than compensatory.

Fourth, the formula operates mechanically without regard to mitigation, offset, or the breaching party's own contributory fault. It does not account for revenue VTS might earn from replacement business, cost savings from not having to maintain the committed fleet, or VTS's own role in causing the termination. A true estimate of damages would necessarily incorporate these factors.

Arguments for Enforceability (Vantor's Likely Position)

Vantor will advance several counterarguments in favor of enforceability:

First, both parties were sophisticated commercial entities represented by experienced counsel. Ashford Meridian LLP drafted the TSA on behalf of Stonefield; VTS presumably had its own legal counsel review and negotiate the Agreement's terms. New York courts are generally reluctant to override freely negotiated liquidated damages provisions in arm's-length commercial contracts between sophisticated parties.

Second, the clause includes the parties' express acknowledgment that the liquidated damages represent a "reasonable estimate" of VTS's damages, that actual damages "would be difficult to ascertain with precision at the time of contracting," and that the liquidated damages "are not a penalty." While such acknowledgments are not dispositive, they are entitled to weight and reflect the parties' contemporaneous understanding of the provision's reasonableness.

Third, VTS's actual damages include not only lost profits but also stranded capital investments (tractors and trailers acquired or dedicated to the SLG contract), workforce disruption (the costs of hiring, training, and retaining approximately 400 drivers for the SLG dedicated fleet), and the loss of a major account representing over 60% of VTS's fleet capacity — a concentration that cannot easily be replaced in the market. When these broader harms are considered, the 75% multiplier may be viewed as a rough but reasonable approximation of total economic harm rather than a pure profit-margin calculation.

Fourth, VTS will argue that precisely because of the difficulty of quantifying these complex, multi-dimensional harms at the time of contracting, the parties chose a formulaic approach — the very purpose for which liquidated damages provisions exist.

Assessment. The enforceability of the liquidated damages clause is uncertain. In my assessment, there is a moderate probability (roughly 40–55%) that a court would find the clause unenforceable as a penalty, given the gross disproportion between the 75% multiplier and VTS's actual operating margins and the availability of standard lost-profits methodologies to calculate actual damages. However, the countervailing considerations — particularly the sophistication of the parties, the express acknowledgment language, and the broader conception of VTS's damages — create substantial uncertainty. A court could reasonably reach either conclusion.

A detailed, separate memorandum analyzing this issue has been prepared and is dated September 19, 2022. That memorandum includes a survey of recent New York case law on liquidated damages enforceability in the commercial transportation and logistics context.

Strategic Note. Section 14.2 operates as a one-way provision — it protects VTS against termination without Cause by Stonefield but does not provide reciprocal liquidated damages to Stonefield if VTS terminates without Cause. This asymmetry may be used by both sides. For Stonefield, the asymmetry supports the argument that the provision is punitive — it imposes a severe formulaic cost on only one party's termination while leaving the other party unconstrained. For Vantor, the asymmetry supports the argument that the clause was a specifically negotiated protection reflecting VTS's unique vulnerability as the party making large, dedicated capital commitments that would be stranded by an early termination.

D. Interaction Between Liquidated Damages and Lost Profits

Vantor's Amended Complaint seeks both liquidated damages ($67,230,000 under Section 14.2) and lost profits ($18,700,000 under a conventional lost-profits theory). This raises the issue of potentially duplicative recovery.

Section 14.2 is structured as the exclusive remedy for termination "other than for Cause." The provision does not state in express terms that it is the exclusive measure of damages, but its structure — providing a specific formula for calculating the damages resulting from early termination — strongly implies that it is intended to be comprehensive. The provision states that the liquidated damages represent "the damages that the Carrier-Provider would suffer as a result of an early termination other than for Cause," using the definite article ("the damages") rather than an indefinite article ("damages"). This phrasing suggests that the liquidated damages are meant to encompass, not supplement, VTS's actual damages from termination.

If the court finds the liquidated damages clause enforceable, Vantor should not be permitted to recover both liquidated damages ($67.23M) and lost profits ($18.7M), as this would constitute impermissible double recovery for the same underlying harm — the loss of the economic benefit of the contract. The liquidated damages provision is, by its nature, a substitute for proof of actual damages; allowing additional lost-profits recovery on top of the stipulated sum would defeat the purpose of the liquidated damages mechanism.

Conversely, if the court finds the liquidated damages clause unenforceable as a penalty, Vantor's recovery would be limited to actual damages (provable lost profits, subject to mitigation and offset), which Stonefield's expert, Dr. Rosser, estimates at a maximum of approximately $8.2 million — significantly less than either the liquidated damages figure or Vantor's own lost-profits claim.

I recommend addressing the duplicative damages argument in a separate memorandum. The key authorities to analyze include JMD Holding Corp. v. Cong. Fin. Corp., 4 N.Y.3d 373 (2005), and Rattigan v. Commodore Int'l Ltd., 739 F. Supp. 167 (S.D.N.Y. 1990).

VII. Section 12.1 — Force Majeure

A. Text of Section 12.1

Section 12.1 of the TSA provides, in relevant part, as follows:

12.1 Force Majeure. Neither party shall be liable for any failure or delay in performing its obligations under this Agreement (including, without limitation, volume commitments under Section 4.1 and service obligations under Section 8.1) to the extent that such failure or delay is caused by, results from, or arises out of events or circumstances beyond the reasonable control of the affected party and that could not have been reasonably foreseen or prevented, including but not limited to: natural disasters; acts of God; earthquakes, floods, hurricanes, or other severe weather events; epidemics or pandemics; government orders, embargoes, sanctions, or quarantine restrictions; acts of war, armed conflict, or terrorism; civil unrest, insurrection, or riots; labor disputes, strikes, or lockouts; and supply chain disruptions or shortages of raw materials, fuel, or equipment not attributable to the affected party's acts or omissions (each, a "Force Majeure Event").

To invoke this Section 12.1, the affected party shall: (i) provide written notice to the other party within ten (10) business days of the commencement of the Force Majeure Event; (ii) specify the nature and expected duration of the event; and (iii) use commercially reasonable efforts to mitigate the impact of the Force Majeure Event on its obligations under this Agreement.

The excuse from performance under this Section 12.1 shall continue only for the duration of the qualifying Force Majeure Event. If a Force Majeure Event persists for more than one hundred eighty (180) consecutive days, either party may terminate this Agreement without liability by providing thirty (30) days' written notice to the other party.

B. Stonefield's Invocation of Force Majeure

Stonefield invoked Section 12.1 for the six-month period of April 2020 through September 2020, citing the COVID-19 pandemic's impact on freight demand and transportation volumes. The invocation was timely — Stonefield provided written notice to VTS within the required ten-business-day period following the onset of the pandemic disruption — and identified the nature of the event (global pandemic, government-imposed shutdowns and restrictions, precipitous decline in freight volumes) and its expected duration.

Effect on ACV. During the force majeure period, Stonefield's obligation to tender the minimum Annual Committed Volume of $43.2 million was suspended pursuant to the express terms of Section 12.1, which exempts "volume commitments under Section 4.1" from liability during a qualifying force majeure event. The adjusted ACV for Contract Year 2 (April 2020 through March 2021) therefore reflects only the six non-excused months (October 2020 through March 2021):

Adjusted CY2 ACV = $43,200,000 × (6/12) = $21,600,000

Actual CY2 tenders: Stonefield tendered $31.8 million in transportation charges to VTS during CY2. This figure exceeds the adjusted ACV of $21.6 million by $10.2 million — demonstrating that Stonefield not only met but substantially exceeded its volume commitment during the force majeure-adjusted period.

Analysis. Stonefield's force majeure invocation appears timely and proper in all respects. COVID-19 plainly qualifies as a "pandemic" under the enumerated force majeure events, and the government orders and restrictions that accompanied the pandemic independently qualify as a separate force majeure event. The six-month duration of the force majeure period (April through September 2020) aligns with the most severe period of freight demand disruption associated with the pandemic and subsequent government-imposed lockdowns and restrictions. The force majeure period did not extend to the full 180-day threshold that would have triggered the termination right, and Stonefield resumed normal volume tendering in October 2020.

This analysis is critical to rebutting Vantor's Amended Complaint allegation in Paragraph 47 that Stonefield failed to tender the ACV in Contract Year 2. Vantor's CY2 shortfall calculation appears to use the unadjusted ACV of $43.2 million as the baseline, ignoring the force majeure adjustment entirely. Under this erroneous calculation, Vantor claims a CY2 shortfall of $11.4 million ($43.2M − $31.8M). The correct calculation, applying the force majeure adjustment, shows no shortfall at all — in fact, an overage of $10.2 million.

C. Force Majeure and CY3

Contract Year 3 (April 2021 through March 2022) is treated differently because Stonefield did not invoke force majeure for any portion of this period. Accordingly, the full Annual Committed Volume of $43.2 million applied to CY3 without adjustment.

Stonefield's actual tenders during CY3, through the date of the Cure Notice on January 18, 2022 (approximately ten months into CY3), totaled $36.5 million. The full CY3 ACV obligation was $43.2 million, yielding an apparent shortfall of $6.7 million ($43.2M − $36.5M).

However, this calculation is misleading because it compares a full year's ACV obligation against only ten months of actual tenders — Stonefield terminated the TSA on March 4, 2022, before the end of CY3. The relevant question is whether a pro-rata adjustment is appropriate.

Pro-rated CY3 ACV (10 months): $43,200,000 × (10/12) = $36,000,000. Against this pro-rated figure, actual tenders of $36.5 million exceeded the pro-rated minimum by $500,000.

This pro-ration defense has logical force but also a meaningful textual weakness. The TSA's ACV commitment is stated as an annual obligation — Section 4.1 requires Stonefield to "tender minimum annual freight volume of $43,200,000 in Transportation Charges to the Carrier-Provider during each Contract Year." The commitment is framed on an annual basis, not a monthly or quarterly basis. Whether Stonefield can pro-rate the annual figure to account for a mid-year termination is an open interpretive question under the Agreement.

That said, the pro-ration argument has logical and equitable appeal. Stonefield cannot be expected to tender the remaining $6.7 million in freight charges during the two months after it terminated the contract. The ACV commitment presupposes a full year of operations; if the contract is terminated before year-end (whether validly or otherwise), it is anomalous to measure the terminating party's performance against a full-year commitment that could not physically be fulfilled.

Counter-argument — Vantor's Volume Shortfall Theory. Vantor's volume shortfall argument functions primarily as a counter-attack on causation. Vantor asserts that Stonefield's own breach (failing to tender committed volumes) was the proximate cause of VTS's performance failures — Stonefield's undertending reduced VTS's revenue, forcing VTS to reassign fleet assets to other accounts (including the "Northwind" account) in order to maintain financial viability, which in turn degraded VTS's ability to meet SLO thresholds on the Stonefield lanes. This is a causation argument rather than a purely contractual one, and its factual predicates will need to be tested through discovery — specifically, through analysis of VTS's fleet redeployment decisions, internal communications regarding capacity allocation, and the chronology of volume tenders versus fleet reassignment.

VIII. Section 7.4 — Substitute Equipment and Surge Capacity

A. Text of Section 7.4

Section 7.4 of the TSA provides, in relevant part, as follows:

7.4 Substitute Equipment and Surge Capacity. In the event that the Carrier-Provider is unable to meet the Shipper-Broker's tender requirements through its committed dedicated fleet, the Carrier-Provider shall use commercially reasonable efforts to provide substitute equipment or surge capacity to fulfill such tender requirements. The Carrier-Provider shall notify the Shipper-Broker within four (4) hours of a tender rejection if substitute equipment cannot be arranged for the applicable load. The Carrier-Provider may utilize owner-operators or subcontracted carriers to fulfill surge capacity obligations, provided that the Shipper-Broker has given its prior written approval of such owner-operators or subcontracted carriers.

B. Analysis

Stonefield's January 18, 2022 Cure Notice cited "chronic failure to provide substitute equipment or surge capacity as required under Section 7.4" as one of the identified material breaches supporting termination for Cause. The Cure Notice referenced specific instances in which VTS rejected tenders without providing the required four-hour notification or arranging substitute equipment.

VTS's tender acceptance rate during Q4 2021 was 71.4%, compared to the contractual threshold of 90%. This means that VTS rejected nearly 29% of Stonefield's freight tenders during the quarter — a significant and repeated failure rate. The critical question for purposes of Section 7.4 is not merely whether VTS rejected tenders (which is measured by the tender acceptance SLO), but whether VTS complied with its obligation to take commercially reasonable efforts to arrange substitute equipment for the tenders it could not accept through its dedicated fleet.

discovery priorities. The following categories of evidence should be targeted in discovery to assess VTS's compliance with Section 7.4:

(i) VTS records documenting tender rejections and whether the four-hour substitute equipment notification was

MEMORANDUM
PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT
To: Patrick Gallagher, Lead Associate; Samuel Eklund, Responsible Partner
From: Simone Laroche, Associate
Date: September 14, 2022
Re: Detailed Review and Analysis of Transportation Services Agreement (Contract Ref. No. SLG-VTS-2019-0315) — Vantor Holdings Corp. v. Stonefield Logistics Group Inc., Case No. 22-cv-07841 (S.D.N.Y.)
Matter No.: 1012-00005
Classification: Attorney-Client Privileged / Work Product
I. Purpose and Scope of Memorandum
This memorandum provides a comprehensive, section-by-section analysis of the Transportation Services Agreement dated March 15, 2019 (the "TSA" or the "Agreement") between Stonefield Logistics Group Inc. ("Stonefield" or "SLG"), in its capacity as "Shipper-Broker," and Vantor Transport Services LLC ("VTS"), in its capacity as "Carrier-Provider." The TSA was drafted by Ashford Meridian LLP on behalf of Stonefield; the drafting team was led by Lorraine Beckwith, Partner in the Commercial Contracts practice group, and Troy Nakamura, Senior Associate, both of Ashford Meridian.
The purpose of this memorandum is to identify and analyze those provisions of the TSA that are critical to Stonefield's defense of the breach-of-contract claim filed by Vantor Holdings Corp. ("Vantor" or "Vantor Holdings"), the parent company and sole member of VTS, in the action captioned Vantor Holdings Corp. v. Stonefield Logistics Group Inc., Case No. 22-cv-07841 (S.D.N.Y.). This memorandum is intended for the litigation team's internal use and is prepared in anticipation of litigation.
The analysis focuses on six key areas of the TSA that are central to the claims and defenses in this action:
(1) Termination for Cause (Section 13.1) — the provision under which Stonefield purported to terminate the TSA;
(2) Cure Notice Requirements (Section 13.2) — the procedural prerequisites for a valid termination for Cause;
(3) Liquidated Damages (Section 14.2) — the provision that establishes Stonefield's potential liability if the termination is determined to have been "other than for Cause";
(4) Force Majeure (Section 12.1) — the provision excusing performance during qualifying events, which is central to the Annual Committed Volume defense;
(5) Substitute Equipment / Surge Capacity (Section 7.4) — the provision requiring VTS to arrange alternative capacity when its dedicated fleet cannot fulfill Stonefield's requirements; and
(6) Exclusivity (Schedule C) — the provisions governing Stonefield's obligation to use VTS as the exclusive carrier on designated lanes.
In addition to these six primary areas, the memorandum addresses several ancillary provisions that bear on Stonefield's litigation posture, including the mutual consequential damages waiver (Section 15.1), the rate adjustment mechanism (Section 5.3), the dispute resolution procedure (Section 16), the minimum volume commitment (Section 4.1), and the integration, amendment, and waiver provisions (Sections 17.5 and 17.6).
Throughout this analysis, the memorandum identifies ambiguities in the TSA's language and interpretive risks that may affect Stonefield's ability to sustain its position that the termination was validly effected for Cause. Where appropriate, the memorandum cross-references companion memoranda that have been or will be prepared on discrete issues requiring more detailed treatment.
II. Executive Summary of Key Findings
The TSA is a detailed and heavily negotiated commercial agreement between two sophisticated parties operating in the truckload transportation industry. It is governed by New York law pursuant to Section 17.1 and contains a forum selection clause designating the United States District Court for the Southern District of New York, or in the alternative, the Supreme Court of the State of New York, New York County, as the exclusive forums for dispute resolution (Section 17.2). The parties have waived trial by jury (Section 17.3).
The TSA establishes an initial five-year term running from April 1, 2019 through March 31, 2024, with one automatic two-year renewal period (extending the term through March 31, 2026) unless either party provides at least 180 days' written notice of non-renewal prior to the expiration of the initial term. Absent termination for Cause under Section 13.1, neither party has a unilateral right to exit the Agreement during the term.
Stonefield's termination of the TSA on March 4, 2022, effected by letter from General Counsel Tobias Wren, invoked Section 13.1(a), asserting that VTS had committed material breaches of the Agreement that remained uncured after the 30-day cure period specified in the Cure Notice of January 18, 2022. At the time of termination, approximately two years and twenty-seven days remained in the initial term (March 4, 2022 through March 31, 2024).
The key conclusions of this analysis are summarized as follows:
Section 13.1 — Termination for Cause. Section 13.1 provides a facially robust framework for termination for Cause, enumerating four grounds including material breach uncured after notice. However, the TSA does not independently define the term "material breach," and the provision thus defaults to the multi-factor common-law standard applied by New York courts. This introduces significant interpretive ambiguity, as whether VTS's performance failures constitute "material" breach will be a fact-intensive inquiry subject to competing characterizations by the parties. This ambiguity is the single most significant interpretive risk in the TSA for purposes of this litigation.
Section 13.2 — Cure Notice. The Cure Notice provision requires that the terminating party specify the alleged breaches "with reasonable particularity." Stonefield's January 18, 2022 Cure Notice, issued by Raymond Hess (Director, Contract Compliance) to Sandra Milescu (COO, Vantor/VTS), identifies all five Service Level Obligation ("SLO") categories, specific contractual thresholds and actual performance figures, documented cargo claims, and Section 7.4 failures. The Cure Notice appears to satisfy the "reasonable particularity" standard, but this issue warrants a separate detailed analysis and is flagged for further memorandum treatment.
Section 14.2 — Liquidated Damages. The liquidated damages clause presents both an offensive opportunity and a significant defensive risk. If the court determines that Stonefield's termination was "other than for Cause," Stonefield's exposure under Section 14.2 is $67.23 million (75% of the Annual Committed Volume multiplied by the remaining term). Stonefield has strong arguments that the clause is an unenforceable penalty under New York law — particularly given the gross disproportion between the 75% multiplier and VTS's actual operating margins — but enforcement is far from certain. The enforceability analysis is the subject of a companion memorandum dated September 19, 2022.
Section 12.1 — Force Majeure. The force majeure clause supports Stonefield's defense against Vantor's allegation that Stonefield failed to tender the Annual Committed Volume in Contract Year 2 (April 2020–March 2021). Stonefield properly invoked Section 12.1 for the six-month period of April through September 2020, citing the COVID-19 pandemic, and the adjusted ACV for that period reflects that Stonefield actually exceeded its obligation. Vantor's calculation of an ACV shortfall in CY2 appears to ignore the force majeure adjustment entirely.
Schedule C — Exclusivity. Schedule C establishes exclusivity obligations on 14 designated "Primary Lanes" but expressly preserves Stonefield's full discretion to use alternative carriers on "Secondary Lanes" and "Spot Lanes." Preliminary analysis indicates that Stonefield's use of Cascade Freight Systems Inc. and Briarwood Trucking Co. — the subject of Vantor's exclusivity violation claim — occurred on lanes classified as Secondary Lanes under Schedule C, placing that usage outside the exclusivity restriction. However, confirmation through detailed lane-by-lane mapping during discovery is required.
Section 15.1 — Consequential Damages Waiver. The mutual consequential damages waiver may bar several categories of Vantor's claimed damages totaling approximately $9.47 million, including stranded asset costs, workforce reduction costs, and mitigation costs. The interplay between Section 15.1 and the liquidated damages provision in Section 14.2 is complex and requires further analysis in a separate memorandum.
III. Overview of the TSA
A. Parties and Signatories
The TSA was executed between the following parties:
Stonefield Logistics Group Inc. ("Stonefield" or "SLG"), designated as "Shipper-Broker" under the Agreement. Stonefield is a Delaware corporation with its principal place of business at 4200 Commerce Parkway, Suite 800, Fort Worth, Texas 76102. Stonefield is one of the largest third-party logistics and freight brokerage firms in the United States, with annual gross revenues in excess of $4.8 billion.
Vantor Transport Services LLC ("VTS"), designated as "Carrier-Provider" under the Agreement. VTS is a New York limited liability company and the wholly owned operating subsidiary of Vantor Holdings Corp. ("Vantor" or "Vantor Holdings"). VTS serves as the primary asset-based trucking operation within the Vantor corporate family, operating a fleet of approximately 650 owned tractors and 2,100 trailers, principally in the Northeast, Mid-Atlantic, and Southeast corridors.
It is important to note that Vantor Holdings Corp. is not a signatory to the TSA. The contracting party on the carrier side is VTS, not its parent company. This distinction may be relevant to standing issues, as Vantor Holdings — not VTS — is the named plaintiff in this litigation. The standing implications of this distinction are addressed in a separate memorandum on standing, dated December 8, 2022, and are not repeated here except as necessary for context.
B. Date of Execution and Effective Date
The TSA was executed on March 15, 2019, by authorized representatives of both parties. The Agreement specifies that its terms and obligations became effective on April 1, 2019 (the "Effective Date"), which also serves as the commencement date for the initial term and for calculating Contract Year obligations, including the Annual Committed Volume.
The TSA bears Contract Reference No. SLG-VTS-2019-0315, assigned by Stonefield's contract management system.
C. Term and Renewal
The TSA establishes a five-year initial term commencing on April 1, 2019 and expiring on March 31, 2024. The Agreement further provides for one automatic two-year renewal period, which would extend the term through March 31, 2026, unless either party provides written notice of non-renewal at least 180 days before the expiration of the initial term. Applying this calculation, the deadline for non-renewal notice with respect to the initial term would be October 2, 2023 (180 days before March 31, 2024).
A critical structural feature of the TSA is that it contains no early termination right other than for Cause under Section 13.1. This means that neither party has a unilateral right to exit the Agreement during the term absent one of the four enumerated grounds for Cause. The absence of a termination-for-convenience provision underscores the parties' intention to create a binding, long-term arrangement and heightens the significance of whether Stonefield's termination satisfied the Cause requirements.
D. Scope of Services
Under the TSA, VTS agreed to provide dedicated and on-demand truckload transportation services across specified lanes in the Northeast, Mid-Atlantic, and Southeast corridors of the United States. The scope of services encompasses both dedicated fleet capacity — tractors and trailers assigned exclusively to Stonefield freight — and on-demand or "surge" capacity to accommodate volume fluctuations.
VTS committed to maintaining a minimum fleet capacity of 400 tractors and 1,200 trailers available for Stonefield freight at all times during the term. This dedicated capacity commitment is a core obligation under the Agreement and is directly measured by the Equipment Availability SLO in Schedule D.
To place this commitment in context, VTS's total fleet as a whole comprises approximately 650 owned tractors and 2,100 trailers. The Stonefield commitment therefore represented approximately 62% of VTS's tractor fleet (400/650) and approximately 57% of its trailer fleet (1,200/2,100). This level of concentration is significant: it means that VTS committed well over half of its entire asset base to the Stonefield relationship, creating substantial economic dependency on the continuation of the TSA. This concentration will be relevant to several issues in the litigation, including (i) VTS's claims of stranded asset damages, (ii) VTS's argument that Stonefield's volume shortfalls forced fleet redeployment, and (iii) the reasonableness of the liquidated damages formula.
E. Governing Law and Forum Selection
Section 17.1 of the TSA provides that the Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to its conflict-of-laws principles. Section 17.2 establishes an exclusive forum selection clause, providing that any action or proceeding arising out of or relating to the Agreement shall be brought in the United States District Court for the Southern District of New York, or alternatively, in the Supreme Court of the State of New York, New York County. The parties consent to personal jurisdiction in those courts and waive any objection based on improper venue or forum non conveniens.
Section 17.3 provides for a mutual waiver of jury trial: both parties irrevocably waive any right to trial by jury in any action or proceeding arising out of or relating to the Agreement. Jury trial waivers are generally enforced under New York law between sophisticated commercial parties that have negotiated the waiver at arm's length, particularly where (as here) the waiver is conspicuously included in a separately identified contractual provision. We do not anticipate a viable challenge to the enforceability of this waiver.
F. Annual Committed Volume (ACV) and Rate Structure
The TSA includes a minimum volume commitment by Stonefield, set forth in Section 4.1. Under this provision, Stonefield committed to tender a minimum annual freight volume of $43.2 million in transportation charges to VTS over each Contract Year (each twelve-month period commencing on April 1). Over the five-year initial term, this creates a total minimum commitment of $216 million ($43.2 million per year times five years). The ACV is a binding obligation, not merely a projection or aspirational target — a distinction that bears on both Stonefield's and Vantor's claims.
The rate structure for transportation charges is established in Schedule B to the TSA, which sets per-mile rates for each designated lane (origin-destination pair). These rates are subject to annual adjustment pursuant to the Rate Adjustment Mechanism in Section 5.3 of the Agreement. Under Section 5.3, rates are adjusted automatically each April 1 based on a blended index comprising 70% diesel fuel index and 30% Consumer Price Index for All Urban Consumers ("CPI-U"). The adjustment is formulaic and automatic — it does not require renegotiation, mutual agreement, or any affirmative action by either party. The rates simply reset each April 1 by application of the index formula to the prior year's rates.
The rate adjustment mechanism is of particular relevance to this litigation because the projected April 2022 adjustment — which would have taken effect on April 1, 2022, less than one month after Stonefield's March 4, 2022 termination — would have increased the weighted average per-mile rate from $2.87 to $3.28. This represents a 14.3% increase (($3.28 − $2.87) / $2.87 = 14.29%), which would have added approximately $6.2 million in annual transportation costs to Stonefield. This projected rate increase is relevant to Vantor's allegation (Amended Complaint, Paragraph 58) that Stonefield's termination was pretextual and economically motivated — i.e., that Stonefield used VTS's performance failures as a convenient pretext for exiting a contract that had become financially unfavorable in light of the impending rate increase. The rate adjustment issue is analyzed in detail in Section XI of this memorandum.
IV. Section 13.1 — Termination for Cause
A. Text of Section 13.1
Section 13.1 of the TSA provides, in relevant part, as follows:
13.1 Termination for Cause. Either party may terminate this Agreement upon the occurrence of any of the following events (each, "Cause"):
(a) A material breach of any provision of this Agreement by the other party that remains uncured for thirty (30) calendar days after the non-breaching party delivers written notice to the breaching party specifying the breach in accordance with Section 13.2;
(b) The insolvency, bankruptcy, or filing of a petition under any bankruptcy or insolvency law, or the making of an assignment for the benefit of creditors, by the other party;
(c) The failure by the Carrier-Provider to maintain any insurance coverage required under Section 9.1 for a period of more than fifteen (15) calendar days after written notice of such failure;
(d) A material violation of applicable law, including but not limited to applicable regulations of the U.S. Department of Transportation and/or the Federal Motor Carrier Safety Administration, by the Carrier-Provider.
B. Analysis of Section 13.1(a) — Material Breach
Stonefield's termination letter of March 4, 2022, issued by General Counsel Tobias Wren and addressed to VTS and Vantor Holdings, invoked Section 13.1(a) as the basis for termination. The letter asserted that VTS had "failed to cure the material breaches" identified in the Cure Notice dated January 18, 2022 within the thirty-day cure period established by Section 13.1(a), and that Stonefield was therefore exercising its right to terminate the Agreement for Cause, effective immediately upon receipt of the termination letter.
A critical observation regarding Section 13.1(a) is that the TSA does not independently define "material breach." The provision employs the phrase "material breach of any provision of this Agreement" but provides no enumeration, threshold, or contractual standard for determining what rises to the level of materiality as distinguished from a minor or immaterial breach. Nor does the Agreement provide that certain obligations are "material" while others are not — all provisions are treated uniformly under the termination clause.
The absence of a contractual definition of "material breach" creates an interpretive ambiguity that defaults to New York common law. Under established New York precedent, whether a breach is "material" is a fact-intensive inquiry that does not lend itself to bright-line rules. New York courts apply a multi-factor test derived from the Restatement (Second) of Contracts Section 241, considering:
(i) the extent to which the injured party will be deprived of the benefit which it reasonably expected;
(ii) the extent to which the injured party can be adequately compensated in damages for the part of that benefit of which it will be deprived;
(iii) the extent to which the party failing to perform or to offer to perform will suffer forfeiture;
(iv) the likelihood that the party failing to perform or to offer to perform will cure its failure, taking account of all the circumstances including any reasonable assurances; and
(v) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.
See JNKM Assocs. LLC v. Gottlieb, 71 A.D.3d 914, 917 (2d Dep't 2010); Bear Stearns Inv. Prods., Inc. v. Hitachi Auto. Prods. (USA), Inc., 401 B.R. 598, 616 (S.D.N.Y. 2009); Restatement (Second) of Contracts Section 241 (1981).
Assessment. VTS's Q4 2021 performance failures were severe and spanned all five Service Level Obligations established in Section 8.1 and Schedule D. The magnitude and breadth of these failures, as described in detail below, strongly supports the argument that they constitute material breach under the common-law multi-factor test. In particular, the first factor — the extent to which the injured party is deprived of the benefit it reasonably expected — weighs heavily in Stonefield's favor: Stonefield contracted for reliable, high-quality transportation services meeting specified performance thresholds, and received dramatically substandard performance across every measurable dimension.
However, the absence of a contractual definition means that Vantor will have room to argue that the breaches were not "material" when viewed in the full context of the parties' commercial relationship. In particular, Vantor is likely to argue that VTS's performance decline should be evaluated in light of Stonefield's own alleged volume shortfalls (reducing VTS's revenue and forcing fleet redeployment), market-wide driver shortages, and Stonefield's alleged failure to cooperate in the performance improvement process contemplated by Section 8.3. Under the multi-factor test, the third factor (forfeiture) and fifth factor (good faith) may favor VTS if Vantor can successfully show that Stonefield's own conduct contributed to or caused the performance failures.
The ambiguity in the "material breach" definition is, in my assessment, the single most significant interpretive issue in the TSA for purposes of this litigation. It transforms what should be a straightforward contractual analysis into a fact-intensive inquiry that will likely be decided at trial or, at best, on a fully developed summary judgment record.
C. Service Level Obligations (SLOs) and Performance Metrics
Section 8.1 of the TSA and Schedule D establish five Service Level Obligations that VTS is required to maintain throughout the term of the Agreement. These SLOs are expressed as quantitative performance thresholds measured on a quarterly basis:
The cargo claims data reflects 16 documented cargo claims filed during November and December 2021, totaling $387,400 in claimed losses — more than double the 0.5% contractual threshold.
Analysis. The magnitude and breadth of these performance failures — across all five SLOs simultaneously, with shortfalls ranging from 11.4 to 23 percentage points — strongly supports a finding of material breach under any reasonable application of the common-law factors. The TSA treats SLOs as core performance obligations. Schedule D describes them as "minimum performance standards" that VTS "shall maintain at all times during the Term," language that reinforces their mandatory character. The SLOs are not aspirational targets, benchmarks for discussion, or guidelines for continuous improvement — they are binding contractual obligations with quantified thresholds.
The equipment availability shortfall is particularly noteworthy. VTS committed to maintaining 400 tractors available for Stonefield freight; only approximately 248 tractors were available in Q4 2021, a shortfall of approximately 152 tractors or 38% of the committed fleet. This shortfall directly affected VTS's ability to accept tenders and make timely pickups, creating a cascading effect across the other SLOs.
However, there is an important caveat. The TSA does not expressly provide that failure to meet SLOs constitutes per se material breach. Section 13.1(a) speaks of "material breach of any provision," and the SLOs are certainly "provisions" of the Agreement, but the TSA does not include a statement such as "any failure to meet the SLO thresholds shall be deemed a material breach." This omission is notable because sophisticated parties drafting a detailed agreement of this type could easily have included such language if they intended SLO failures to automatically trigger termination rights.
Moreover, Section 8.3 provides for "performance improvement plans" upon SLO failures, a provision that suggests the parties contemplated a graduated remedial process rather than immediate termination rights in the event of performance shortfalls. The existence of Section 8.3 creates a potential argument for Vantor that Stonefield was required to exhaust the performance improvement plan process before invoking Section 13.1(a) based on SLO failures. This interaction is analyzed in detail immediately below.
D. Interaction Between Sections 13.1 and 8.3
The interaction between Section 8.3 (performance improvement plans) and Section 13.1(a) (termination for material breach) is a potentially significant interpretive issue.
Section 8.3 provides, in relevant part, that upon a failure to meet one or more SLO thresholds in any quarterly reporting period, "the parties may develop a performance improvement plan setting forth specific remedial actions, milestones, and timelines for restoring performance to SLO thresholds." The provision further states that "[t]he parties shall cooperate in good faith in the development and implementation of any such performance improvement plan."
The central interpretive question is whether Section 8.3 creates a condition precedent to termination for Cause based on SLO failures — i.e., whether Stonefield was required to engage in the performance improvement plan process before invoking Section 13.1(a).
Conclusion. The better reading of the Agreement is that Section 8.3 provides an optional collaborative remedy that does not supplant the independent termination right established in Section 13.1(a). Several textual indicators support this interpretation:
First, the use of "may" rather than "shall" in the operative clause ("the parties may develop a performance improvement plan") is permissive, not mandatory. If the parties had intended to make the performance improvement plan process a prerequisite to termination, the natural drafting choice would have been "shall" — i.e., "the parties shall develop a performance improvement plan before either party may exercise termination rights under Section 13.1."
Second, Section 13.1 contains no cross-reference to Section 8.3 and does not condition the exercise of termination rights on compliance with or exhaustion of any performance improvement process. Section 13.1 is self-contained: it requires only a material breach, written notice, and expiration of the cure period.
Third, the second sentence of Section 8.3 ("the parties shall cooperate in good faith in the development and implementation of any such performance improvement plan") uses mandatory language ("shall cooperate") only with respect to the implementation of a plan that has been developed — not with respect to the initial decision to develop a plan. This structure confirms that the decision to develop a plan is discretionary, while cooperation in executing a plan, once initiated, is mandatory.
However, Vantor will likely argue that the inclusion of Section 8.3 reflects the parties' shared intent that SLO failures be addressed through a collaborative, graduated process before the nuclear option of termination is invoked. Vantor will contend that reading Section 13.1 in isolation from Section 8.3 renders Section 8.3 meaningless — a "surplusage" argument that has traction under New York contract interpretation principles, which favor readings that give effect to all provisions. Vantor may also invoke the implied covenant of good faith and fair dealing to argue that Stonefield's decision to bypass the performance improvement plan process and proceed directly to termination was procedurally premature and substantively disproportionate.
Recommendation. While the textual arguments favor Stonefield's position, the interplay between Sections 8.3 and 13.1 presents an interpretive risk that should be accounted for in briefing strategy. Stonefield should emphasize that (i) the permissive language of Section 8.3 is dispositive; (ii) no performance improvement plan was ever initiated or requested by either party, meaning there is no plan for Stonefield to have "bypassed"; and (iii) the severity and breadth of VTS's Q4 2021 failures — across all five SLOs, with shortfalls of 11 to 23 percentage points — rendered a performance improvement plan inadequate as a practical matter. A carrier operating at 62% of committed fleet capacity cannot be "improved" to compliance through a remedial plan; the problem is structural, not incremental.
E. Burden of Proof Considerations
Under New York law, the party invoking termination for Cause generally bears the burden of proving that Cause existed at the time of termination. This means that Stonefield, as the terminating party, will bear the burden of establishing each element of the Section 13.1(a) termination at trial or on summary judgment.
Specifically, Stonefield should be prepared to demonstrate through admissible evidence:
(i) each SLO failure with objective, contemporaneous data (performance reports, tender records, cargo claims files, equipment logs);
(ii) that the SLO failures, individually or collectively, constituted "material breach" under the applicable New York common-law standard;
(iii) that the January 18, 2022 Cure Notice was adequate — i.e., that it specified the alleged breaches with "reasonable particularity" as required by Section 13.2; and
(iv) that VTS failed to cure the identified breaches within the thirty-day cure period (January 18 through February 17, 2022).
Stonefield's ability to meet this burden will depend heavily on the quality and completeness of contemporaneous documentation. I recommend that the litigation team prioritize the preservation and collection of all performance reporting data, tender acceptance/rejection records, equipment availability logs, cargo claims files, and internal and external communications related to VTS's Q4 2021 and Q1 2022 performance.
V. Section 13.2 — Cure Notice Requirements
A. Text of Section 13.2
Section 13.2 of the TSA provides, in relevant part, as follows:
13.2 Cure Notice. Prior to terminating this Agreement for Cause under Section 13.1(a) or Section 13.1(c), the terminating party shall deliver a written notice to the breaching party (a "Cure Notice") specifying with reasonable particularity the alleged breach or breaches giving rise to the right of termination and providing the breaching party the applicable cure period in which to cure such breach(es). The cure period shall be thirty (30) calendar days from the date of receipt of the Cure Notice for breaches under Section 13.1(a) and fifteen (15) calendar days from the date of receipt of the Cure Notice for insurance-related breaches under Section 13.1(c). The cure period shall commence upon receipt of the Cure Notice by the breaching party.
B. Analysis of "Reasonable Particularity" Standard
The TSA requires that the Cure Notice specify the alleged breaches "with reasonable particularity," but does not further define this term or prescribe any particular form or content requirements for the notice. The phrase "reasonable particularity" establishes a sufficiency standard that must be interpreted under the governing law.
Under New York law, the sufficiency of a cure notice is judged by whether it puts the breaching party on reasonable notice of the nature and scope of the alleged breaches, thereby enabling the breaching party to understand what it must do to cure and to take timely curative action. The standard does not require exhaustive detail or legal precision; it requires a description that is specific enough to identify the problem and practical enough to enable a response. See Filmline (Cross-Country) Prods., Inc. v. United Artists Corp., 865 F.2d 513, 518 (2d Cir. 1989) (cure notice must provide breaching party "sufficient information to understand and cure the alleged breach").
Stonefield's Cure Notice of January 18, 2022. The Cure Notice was sent by Raymond Hess, Director of Contract Compliance at Stonefield, to Sandra Milescu, Chief Operating Officer of Vantor/VTS. The notice was transmitted by both overnight courier and electronic mail and identified the following:
•  Each of the five SLO categories established in Section 8.1 and Schedule D;
•  The specific contractual threshold for each SLO;
•  VTS's actual Q4 2021 performance figure for each SLO, with supporting quarterly data;
•  The 16 documented cargo claims in November and December 2021, totaling $387,400, with claim reference numbers;
•  VTS's chronic failure to provide substitute equipment or surge capacity as required under Section 7.4, citing specific instances of tender rejections without timely four-hour notification or substitute arrangement;
•  A statement that the identified failures constituted material breaches of the Agreement under Section 13.1(a); and
•  A statement that VTS had thirty (30) calendar days from receipt of the Cure Notice to cure the identified breaches, failing which Stonefield would exercise its right to terminate the Agreement for Cause.
Assessment. The Cure Notice appears to satisfy the "reasonable particularity" requirement. It identifies specific SLO metrics, contractual thresholds, actual performance figures, documented cargo claims with supporting detail, and concrete Section 7.4 failures. The notice is not vague or conclusory — it provides VTS with sufficient information to understand the nature and scope of the alleged breaches and to determine what remedial actions would be necessary to cure them within the thirty-day period.
A separate memorandum will provide more detailed analysis of the Cure Notice's adequacy, including a comparison of the notice's specificity against the standards applied in relevant New York case law and an assessment of whether any arguable deficiency in the notice could provide a basis for Vantor to challenge the validity of the termination.
C. The 30-Day Cure Period
The cure period under Section 13.2 commenced upon VTS's receipt of the Cure Notice on January 18, 2022. The notice specified a cure deadline of thirty calendar days from receipt, establishing a cure expiration date of February 17, 2022.
Vantor's Response — February 14, 2022. Three days before the cure deadline, VTS sent a written response dated February 14, 2022. The response was sent by Derek Pruitt, Vice President of Business Development at Vantor Holdings, and addressed to Janet Kirkwood, Vice President of Carrier Relations at Stonefield. The substantive content of the response may be summarized as follows:
•  VTS acknowledged "operational challenges" during Q4 2021 but characterized them as temporary and attributable to external factors;
•  VTS attributed its performance failures to three causes: (i) the nationwide driver shortage affecting the entire trucking industry; (ii) Stonefield's alleged failure to tender the minimum committed volumes under Section 4.1, which VTS claimed reduced its revenue and forced it to reassign fleet assets to other accounts; and (iii) Stonefield's alleged instructions to divert volume to lower-cost spot market carriers, further reducing VTS's workload;
•  VTS asserted that it had "substantially cured the identified deficiencies" and that its Q1 2022 performance was "trending toward compliance with all SLO thresholds";
•  VTS disputed the cargo claims data, asserting that several of the 16 claims were attributable to shipper packing deficiencies rather than carrier fault; and
•  VTS characterized Stonefield's Cure Notice as "disproportionate" and suggested that the parties should instead engage in the performance improvement plan process contemplated by Section 8.3.
Notably, the February 14 response does not identify specific remedial actions taken to cure the identified breaches, does not provide updated performance metrics demonstrating improvement, and does not address the equipment availability shortfall (VTS's most severe SLO failure, at 62% versus the 85% threshold). The response is largely defensive and blame-shifting in character rather than demonstrating actual cure.
Stonefield's Termination — March 4, 2022. Stonefield terminated the TSA by letter dated March 4, 2022, issued by General Counsel Tobias Wren. The termination letter was sent fifteen days after the expiration of the thirty-day cure period on February 17, 2022. The letter asserted that VTS had "failed to cure the material breaches identified in the Cure Notice dated January 18, 2022" and invoked Section 13.1(a) as the basis for immediate termination.
Key issue. Whether VTS's February 14 response constituted "substantial cure" or merely acknowledged problems while deflecting responsibility is a critical factual question. The response does not present objective evidence of cure — it claims that performance is "trending toward compliance" but provides no data to support this assertion. Under New York law, "substantial cure" generally requires the breaching party to have remedied the breach in all material respects, not merely to have begun taking steps toward improvement or to have expressed an intention to cure in the future. A separate memorandum will analyze the "substantial cure" doctrine in detail and apply it to the facts of VTS's February 14 response.
D. Gap Between Cure Expiration and Termination
The TSA does not specify a deadline by which the non-breaching party must exercise its termination right after the cure period expires. Section 13.1(a) provides that the non-breaching party "may terminate" upon the occurrence of Cause (including uncured material breach), but does not impose a time limit on when that right must be exercised. Stonefield waited fifteen days — from February 17, 2022 (cure expiration) to March 4, 2022 (termination letter) — before issuing the termination letter.
Risk. Vantor could argue that the fifteen-day delay constitutes waiver of the termination right or that Stonefield's failure to terminate immediately upon cure expiration indicates that the breaches were not truly material or uncured. If the breaches were so severe as to warrant termination, Vantor might contend, Stonefield would have acted promptly rather than waiting more than two weeks.
However, a fifteen-day gap is unlikely to constitute waiver under New York law absent affirmative conduct by Stonefield indicating acceptance of continued performance or an intention to forgo the right to terminate. Mere passage of time, without more, is generally insufficient to establish waiver, particularly where (as here) the contract includes an express anti-waiver provision. See Section 17.6, discussed in Section XIII.E of this memorandum. The delay is far more likely attributable to the routine internal processes of a large corporate entity — specifically, the time required for Tobias Wren to consult with outside counsel at Ashford Meridian, coordinate with internal stakeholders, and prepare a formal termination letter. The delay is unremarkable and well within the range of reasonable administrative processing.
Recommendation. Notwithstanding the above analysis, it would be prudent to confirm through fact development that Stonefield did not engage in any conduct during the February 17 through March 4, 2022 period that could be characterized as acceptance of VTS's performance, ratification of the contract, or waiver of the right to terminate. In particular, the litigation team should determine whether Stonefield continued to tender freight to VTS during this period and, if so, the nature and volume of such tenders. Continued tendering during the gap period could, depending on the circumstances, be characterized by Vantor as inconsistent with a genuine belief that VTS was in material, uncured breach.
VI. Section 14.2 — Liquidated Damages
A. Text of Section 14.2
Section 14.2 of the TSA provides, in relevant part, as follows:
14.2 Liquidated Damages for Termination Other Than for Cause. In the event that the Shipper-Broker terminates this Agreement other than for Cause (as defined in Section 13.1), the Shipper-Broker shall pay to the Carrier-Provider, as liquidated damages and not as a penalty, an amount equal to seventy-five percent (75%) of the Annual Committed Volume multiplied by the number of full and partial Contract Years remaining in the then-current Term (with any partial Contract Year calculated on a pro-rata basis based on the number of days remaining in such partial Contract Year divided by 365). The parties acknowledge and agree that the liquidated damages set forth herein represent a reasonable estimate of the damages that the Carrier-Provider would suffer as a result of an early termination other than for Cause, that actual damages would be difficult to ascertain with precision at the time of contracting, and that such liquidated damages are not a penalty.
B. Calculation of Liquidated Damages Claimed
Based on the formula established in Section 14.2, Vantor's liquidated damages claim is calculated as follows:
Remaining term at termination: March 4, 2022 through March 31, 2024 — a total of approximately two full remaining Contract Years (CY3: through March 31, 2023; CY4: April 1, 2023 through March 31, 2024) and a partial year of approximately 27 days (March 4, 2022 through March 31, 2022, representing the balance of CY3 already in progress).
•  Two full remaining Contract Years: 75% × $43,200,000 × 2 = $64,800,000
•  Partial year (27 days): 75% × $43,200,000 × (27/365) ≈ $2,396,712 (rounded to $2,430,000 per the Trask Greystone report prepared by Dr. Philip Trask, Vantor's damages expert)
•  Total liquidated damages claimed: $67,230,000
This amount is triggered only if the court determines that Stonefield's termination was "other than for Cause." If the termination is found to have been validly effected for Cause under Section 13.1, no liquidated damages are owed, and the entirety of the $67.23 million claim falls away. This binary outcome underscores the critical importance of the Cause analysis in Section IV of this memorandum.
C. Enforceability Analysis Under New York Law
New York courts apply a well-established two-part test to determine whether a liquidated damages provision is enforceable or constitutes an unenforceable penalty:
(1) Was the liquidated damages amount a reasonable estimate of the probable damages that would result from a breach at the time of contracting?
(2) Were actual damages difficult to ascertain at the time of contracting?
If both prongs are satisfied, the clause is enforceable and the stipulated amount is recoverable without proof of actual damages. If either prong is not met — if the clause is grossly disproportionate to any reasonable forecast of actual harm, or if actual damages were readily ascertainable at contracting — the clause may be found to be an unenforceable penalty. See Truck Rent-A-Ctr., Inc. v. Purdy Corp., 41 N.Y.2d 354, 355–56 (1977); JMD Holding Corp. v. Cong. Fin. Corp., 4 N.Y.3d 373, 380 (2005).
Arguments for Unenforceability (Stonefield's Position)
Stonefield has strong arguments that Section 14.2 is an unenforceable penalty under both prongs of the New York test:
First, actual damages from early termination of a transportation services contract are readily ascertainable — they comprise the difference between contract revenue and avoided costs, which is to say, lost profits. The parties were both sophisticated commercial entities with extensive financial data regarding operating costs, margins, and profitability on a per-lane and per-mile basis. VTS's actual lost profits from early termination could have been calculated with reasonable precision at the time of contracting using standard financial methods.
Second, the 75% multiplier bears no demonstrated relationship to VTS's anticipated profit margin on the Stonefield contract. VTS's actual operating margin on SLG freight is reported to be approximately 12%. A liquidated damages formula based on 75% of revenue — more than six times VTS's actual profit margin — is not a "reasonable estimate" of lost profits; it is a windfall that vastly overcompensates VTS for the actual economic harm of early termination.
Third, the resulting $67.23 million figure is grossly disproportionate to any reasonable estimate of VTS's actual harm. Dr. Evelyn Rosser of Kensington Analytics Group LLC, Stonefield's retained damages expert, opines that the maximum defensible damages under an alternative lost-profits theory are approximately $8.2 million. A liquidated damages figure that exceeds actual damages by a factor of approximately 8:1 is, by any standard, punitive rather than compensatory.
Fourth, the formula operates mechanically without regard to mitigation, offset, or the breaching party's own contributory fault. It does not account for revenue VTS might earn from replacement business, cost savings from not having to maintain the committed fleet, or VTS's own role in causing the termination. A true estimate of damages would necessarily incorporate these factors.
Arguments for Enforceability (Vantor's Likely Position)
Vantor will advance several counterarguments in favor of enforceability:
First, both parties were sophisticated commercial entities represented by experienced counsel. Ashford Meridian LLP drafted the TSA on behalf of Stonefield; VTS presumably had its own legal counsel review and negotiate the Agreement's terms. New York courts are generally reluctant to override freely negotiated liquidated damages provisions in arm's-length commercial contracts between sophisticated parties.
Second, the clause includes the parties' express acknowledgment that the liquidated damages represent a "reasonable estimate" of VTS's damages, that actual damages "would be difficult to ascertain with precision at the time of contracting," and that the liquidated damages "are not a penalty." While such acknowledgments are not dispositive, they are entitled to weight and reflect the parties' contemporaneous understanding of the provision's reasonableness.
Third, VTS's actual damages include not only lost profits but also stranded capital investments (tractors and trailers acquired or dedicated to the SLG contract), workforce disruption (the costs of hiring, training, and retaining approximately 400 drivers for the SLG dedicated fleet), and the loss of a major account representing over 60% of VTS's fleet capacity — a concentration that cannot easily be replaced in the market. When these broader harms are considered, the 75% multiplier may be viewed as a rough but reasonable approximation of total economic harm rather than a pure profit-margin calculation.
Fourth, VTS will argue that precisely because of the difficulty of quantifying these complex, multi-dimensional harms at the time of contracting, the parties chose a formulaic approach — the very purpose for which liquidated damages provisions exist.
Assessment. The enforceability of the liquidated damages clause is uncertain. In my assessment, there is a moderate probability (roughly 40–55%) that a court would find the clause unenforceable as a penalty, given the gross disproportion between the 75% multiplier and VTS's actual operating margins and the availability of standard lost-profits methodologies to calculate actual damages. However, the countervailing considerations — particularly the sophistication of the parties, the express acknowledgment language, and the broader conception of VTS's damages — create substantial uncertainty. A court could reasonably reach either conclusion.
A detailed, separate memorandum analyzing this issue has been prepared and is dated September 19, 2022. That memorandum includes a survey of recent New York case law on liquidated damages enforceability in the commercial transportation and logistics context.
Strategic Note. Section 14.2 operates as a one-way provision — it protects VTS against termination without Cause by Stonefield but does not provide reciprocal liquidated damages to Stonefield if VTS terminates without Cause. This asymmetry may be used by both sides. For Stonefield, the asymmetry supports the argument that the provision is punitive — it imposes a severe formulaic cost on only one party's termination while leaving the other party unconstrained. For Vantor, the asymmetry supports the argument that the clause was a specifically negotiated protection reflecting VTS's unique vulnerability as the party making large, dedicated capital commitments that would be stranded by an early termination.
D. Interaction Between Liquidated Damages and Lost Profits
Vantor's Amended Complaint seeks both liquidated damages ($67,230,000 under Section 14.2) and lost profits ($18,700,000 under a conventional lost-profits theory). This raises the issue of potentially duplicative recovery.
Section 14.2 is structured as the exclusive remedy for termination "other than for Cause." The provision does not state in express terms that it is the exclusive measure of damages, but its structure — providing a specific formula for calculating the damages resulting from early termination — strongly implies that it is intended to be comprehensive. The provision states that the liquidated damages represent "the damages that the Carrier-Provider would suffer as a result of an early termination other than for Cause," using the definite article ("the damages") rather than an indefinite article ("damages"). This phrasing suggests that the liquidated damages are meant to encompass, not supplement, VTS's actual damages from termination.
If the court finds the liquidated damages clause enforceable, Vantor should not be permitted to recover both liquidated damages ($67.23M) and lost profits ($18.7M), as this would constitute impermissible double recovery for the same underlying harm — the loss of the economic benefit of the contract. The liquidated damages provision is, by its nature, a substitute for proof of actual damages; allowing additional lost-profits recovery on top of the stipulated sum would defeat the purpose of the liquidated damages mechanism.
Conversely, if the court finds the liquidated damages clause unenforceable as a penalty, Vantor's recovery would be limited to actual damages (provable lost profits, subject to mitigation and offset), which Stonefield's expert, Dr. Rosser, estimates at a maximum of approximately $8.2 million — significantly less than either the liquidated damages figure or Vantor's own lost-profits claim.
I recommend addressing the duplicative damages argument in a separate memorandum. The key authorities to analyze include JMD Holding Corp. v. Cong. Fin. Corp., 4 N.Y.3d 373 (2005), and Rattigan v. Commodore Int'l Ltd., 739 F. Supp. 167 (S.D.N.Y. 1990).
VII. Section 12.1 — Force Majeure
A. Text of Section 12.1
Section 12.1 of the TSA provides, in relevant part, as follows:
12.1 Force Majeure. Neither party shall be liable for any failure or delay in performing its obligations under this Agreement (including, without limitation, volume commitments under Section 4.1 and service obligations under Section 8.1) to the extent that such failure or delay is caused by, results from, or arises out of events or circumstances beyond the reasonable control of the affected party and that could not have been reasonably foreseen or prevented, including but not limited to: natural disasters; acts of God; earthquakes, floods, hurricanes, or other severe weather events; epidemics or pandemics; government orders, embargoes, sanctions, or quarantine restrictions; acts of war, armed conflict, or terrorism; civil unrest, insurrection, or riots; labor disputes, strikes, or lockouts; and supply chain disruptions or shortages of raw materials, fuel, or equipment not attributable to the affected party's acts or omissions (each, a "Force Majeure Event").
To invoke this Section 12.1, the affected party shall: (i) provide written notice to the other party within ten (10) business days of the commencement of the Force Majeure Event; (ii) specify the nature and expected duration of the event; and (iii) use commercially reasonable efforts to mitigate the impact of the Force Majeure Event on its obligations under this Agreement.
The excuse from performance under this Section 12.1 shall continue only for the duration of the qualifying Force Majeure Event. If a Force Majeure Event persists for more than one hundred eighty (180) consecutive days, either party may terminate this Agreement without liability by providing thirty (30) days' written notice to the other party.
B. Stonefield's Invocation of Force Majeure
Stonefield invoked Section 12.1 for the six-month period of April 2020 through September 2020, citing the COVID-19 pandemic's impact on freight demand and transportation volumes. The invocation was timely — Stonefield provided written notice to VTS within the required ten-business-day period following the onset of the pandemic disruption — and identified the nature of the event (global pandemic, government-imposed shutdowns and restrictions, precipitous decline in freight volumes) and its expected duration.
Effect on ACV. During the force majeure period, Stonefield's obligation to tender the minimum Annual Committed Volume of $43.2 million was suspended pursuant to the express terms of Section 12.1, which exempts "volume commitments under Section 4.1" from liability during a qualifying force majeure event. The adjusted ACV for Contract Year 2 (April 2020 through March 2021) therefore reflects only the six non-excused months (October 2020 through March 2021):
Adjusted CY2 ACV = $43,200,000 × (6/12) = $21,600,000
Actual CY2 tenders: Stonefield tendered $31.8 million in transportation charges to VTS during CY2. This figure exceeds the adjusted ACV of $21.6 million by $10.2 million — demonstrating that Stonefield not only met but substantially exceeded its volume commitment during the force majeure-adjusted period.
Analysis. Stonefield's force majeure invocation appears timely and proper in all respects. COVID-19 plainly qualifies as a "pandemic" under the enumerated force majeure events, and the government orders and restrictions that accompanied the pandemic independently qualify as a separate force majeure event. The six-month duration of the force majeure period (April through September 2020) aligns with the most severe period of freight demand disruption associated with the pandemic and subsequent government-imposed lockdowns and restrictions. The force majeure period did not extend to the full 180-day threshold that would have triggered the termination right, and Stonefield resumed normal volume tendering in October 2020.
This analysis is critical to rebutting Vantor's Amended Complaint allegation in Paragraph 47 that Stonefield failed to tender the ACV in Contract Year 2. Vantor's CY2 shortfall calculation appears to use the unadjusted ACV of $43.2 million as the baseline, ignoring the force majeure adjustment entirely. Under this erroneous calculation, Vantor claims a CY2 shortfall of $11.4 million ($43.2M − $31.8M). The correct calculation, applying the force majeure adjustment, shows no shortfall at all — in fact, an overage of $10.2 million.
C. Force Majeure and CY3
Contract Year 3 (April 2021 through March 2022) is treated differently because Stonefield did not invoke force majeure for any portion of this period. Accordingly, the full Annual Committed Volume of $43.2 million applied to CY3 without adjustment.
Stonefield's actual tenders during CY3, through the date of the Cure Notice on January 18, 2022 (approximately ten months into CY3), totaled $36.5 million. The full CY3 ACV obligation was $43.2 million, yielding an apparent shortfall of $6.7 million ($43.2M − $36.5M).
However, this calculation is misleading because it compares a full year's ACV obligation against only ten months of actual tenders — Stonefield terminated the TSA on March 4, 2022, before the end of CY3. The relevant question is whether a pro-rata adjustment is appropriate.
Pro-rated CY3 ACV (10 months): $43,200,000 × (10/12) = $36,000,000. Against this pro-rated figure, actual tenders of $36.5 million exceeded the pro-rated minimum by $500,000.
This pro-ration defense has logical force but also a meaningful textual weakness. The TSA's ACV commitment is stated as an annual obligation — Section 4.1 requires Stonefield to "tender minimum annual freight volume of $43,200,000 in Transportation Charges to the Carrier-Provider during each Contract Year." The commitment is framed on an annual basis, not a monthly or quarterly basis. Whether Stonefield can pro-rate the annual figure to account for a mid-year termination is an open interpretive question under the Agreement.
That said, the pro-ration argument has logical and equitable appeal. Stonefield cannot be expected to tender the remaining $6.7 million in freight charges during the two months after it terminated the contract. The ACV commitment presupposes a full year of operations; if the contract is terminated before year-end (whether validly or otherwise), it is anomalous to measure the terminating party's performance against a full-year commitment that could not physically be fulfilled.
Counter-argument — Vantor's Volume Shortfall Theory. Vantor's volume shortfall argument functions primarily as a counter-attack on causation. Vantor asserts that Stonefield's own breach (failing to tender committed volumes) was the proximate cause of VTS's performance failures — Stonefield's undertending reduced VTS's revenue, forcing VTS to reassign fleet assets to other accounts (including the "Northwind" account) in order to maintain financial viability, which in turn degraded VTS's ability to meet SLO thresholds on the Stonefield lanes. This is a causation argument rather than a purely contractual one, and its factual predicates will need to be tested through discovery — specifically, through analysis of VTS's fleet redeployment decisions, internal communications regarding capacity allocation, and the chronology of volume tenders versus fleet reassignment.
VIII. Section 7.4 — Substitute Equipment and Surge Capacity
A. Text of Section 7.4
Section 7.4 of the TSA provides, in relevant part, as follows:
7.4 Substitute Equipment and Surge Capacity. In the event that the Carrier-Provider is unable to meet the Shipper-Broker's tender requirements through its committed dedicated fleet, the Carrier-Provider shall use commercially reasonable efforts to provide substitute equipment or surge capacity to fulfill such tender requirements. The Carrier-Provider shall notify the Shipper-Broker within four (4) hours of a tender rejection if substitute equipment cannot be arranged for the applicable load. The Carrier-Provider may utilize owner-operators or subcontracted carriers to fulfill surge capacity obligations, provided that the Shipper-Broker has given its prior written approval of such owner-operators or subcontracted carriers.
B. Analysis
Stonefield's January 18, 2022 Cure Notice cited "chronic failure to provide substitute equipment or surge capacity as required under Section 7.4" as one of the identified material breaches supporting termination for Cause. The Cure Notice referenced specific instances in which VTS rejected tenders without providing the required four-hour notification or arranging substitute equipment.
VTS's tender acceptance rate during Q4 2021 was 71.4%, compared to the contractual threshold of 90%. This means that VTS rejected nearly 29% of Stonefield's freight tenders during the quarter — a significant and repeated failure rate. The critical question for purposes of Section 7.4 is not merely whether VTS rejected tenders (which is measured by the tender acceptance SLO), but whether VTS complied with its obligation to take commercially reasonable efforts to arrange substitute equipment for the tenders it could not accept through its dedicated fleet.
discovery priorities. The following categories of evidence should be targeted in discovery to assess VTS's compliance with Section 7.4:
(i) VTS records documenting tender rejections and whether the four-hour substitute equipment notification was

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